Posts Tagged ‘energy management’

2 Jun 29 2011 @ 10:55am by Matt Smith in energy consulting, Global Energy, risk management, Risk Strategy, Technology

Schneider Electric Burrito Bites

I’ve been doing some digging recently into our new suitors, Schneider Electric, and thought it would be useful to share some of this info, along with some high level facts / snacks / bites to chomp on. Transitioning from a company of under a thousand employees to being a part of one with over a hundred and ten thousand means there is a lot to learn, and that there is a lot that goes on underneath this new bonnet (see left). Actually, by bonnet I mean hood; am slipping back into my European ways (the bonnet at left will be revealed later…). So enjoy and relax, with these Schneider facts: 

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1 May 12 2011 @ 10:58am by Matt Smith in Crude Oil, Economy, Global Energy, Natural Gas, Random, Risk Strategy

Scooby, Scrappy, Velma, and Efficient Market Hypothesis

Last week’s crazy moves across Commodityland™ left me needing a stiff drink brought me back to thinking about financial market theory (apologies…despite the presence of Scooby I am going to geek out a little bit) and how sometimes it gets thrown out the window.

From a 17% sell-off in crude, to a 31% sell-off in silver last week, commodities were put through the wringer. When extremities like this happen, it makes us question the underlying assumptions that we make about markets, and whether these assumptions hold true. » read more

1 Aug 12 2010 @ 8:46am by Matt Smith in energy consulting, Random, risk management, Risk Strategy

‘That’s not a motto, that’s just you saying a bunch of things.’

There’s a hilarious line in the film Role Models, where Paul Rudd turns to Seann William Scott and says, exasperated: ‘That’s not a motto, that’s just you saying a bunch of things’. Not only did this make me chuckle, but it struck a chord, as there are many mottos bantered around in financial markets which are, well, just a bunch of things and little else. So this week I thought I would seek inspiration from my work colleagues – my own role models, per se – to provide me with some words of wisdom. Some relate to energy, and some relate to life. But all we can relate to, so enjoy:

‘Without energy there is no capacity to do work.’
- This makes sense in a couple of ways, my learned colleague told me; not only is this the dictionary definition for energy, but without energy, there would be no Summit. He’s got a point (well, two in fact).

‘You may not believe everything that is said, but if you look hard enough, and take the emotion out of it, you might see some truth worth hearing.’
- This is a message we try to get across to clients; even if you don’t believe us, we are here to tell you the stark truths.

‘Change will come when the pain of staying the same is worse than the pain of change.”
- Again, at some point, clients realize it is wrong to fear change, especially when maintaining the status quo involves the pain of losing money.

‘You can’t always get what you want…but when you try sometimes, you get what you need.’
- This is something our CFO tells (sings?) to his kids, but it relates just as well to hedging strategies; you may not get what you want (= the lowest price), but you get what you need (= budget certainty).

‘You know what you get when you don’t get what you want…experience.’
- And the flip-side of not hedging; if the market turns against you, you gain the experience of why hedging makes sense.

Five further mottos for life:
–’Never mistake activity for achievement.’
–’Never celebrate mediocrity.’
–’No one said life is easy.’
–’You get what you get and you don’t throw a fit.’
–’I will not idly tiptoe through life only to arrive safely at death’s doorstep.’

Thanks so much to this week’s role models…Ann Barzak, Deena Burnett, Evan Cox, George Willett, Joe Higgins, Joyce Gee, Michelle Kerbow, Phil Wafford, Roger Durham, Tom Muddell.

I leave you with two mottos from our CEO, Steve Wilhite (it’s great he humors my occasional whims…), one for work and one for life:

‘Most people fail to plan, not plan to fail…but failing to plan is like planning to fail.’

‘Work then play, work then play, work then play – if you do that, the work is better and so is the play.’

2 May 20 2010 @ 10:35am by Matt Smith in Economy, energy consulting, Global Energy, risk management, Risk Strategy

Commodityspeak Through the Medium of Shakespeare.

To tie in with the shindig that is the launch party of our UK office at Shakespeare’s Globe Theatre on June 15th, I present to thee forthwith ten quotes Billy the Bard would say if he were involved in commodity risk management:

1) There is nothing either good or bad; but thinking makes it so – yes, markets are driven by various forces passing the parcel, from fundamentals to technical analysis to outside influences. But sentiment, opinion and fear/greed also play a starring role. So even if something is not in bad shape, if the consensus makes it so, then prices will reflect this.

2) Measure for Measure – a measured approach to mitigating risk is the way forward, and ties directly to my haiku on risk management: uncertainty is…..an ever-present threat so….hedge hedge hedge hedge hedge.

3) Chaos is come again – Othello knew where it was at…crude down 23% in 13 unlucky trading days, from top of the pops (high of the year $87.15 on May 3rd) to the drop of all drops ($66.91 today – May 20th).

4) Better three hours too soon than a minute too late – hedging is not about picking the bottom of the market, it is about mitigating risk.

5) Though this be madness, yet there is method in’t – why it makes sense to quantify risk in commodity markets. Although no-one can perfectly predict the future, by equipping yourself with a Batman-like utility belt of tools for assessing the potential evolution and volatility of a market – from macroeconomic or econometric models to Value-at-Risk to technical analysis – you can establish parameters to quantify present and future risk and reward.

6) Foregone conclusion – Pah! Shazbat! Unlike in Othello, there is no foregone conclusion in commodity markets. Which is probably a good thing too, as there would be no need for an energy consultant (= Unhooray!).

7) Screw your courage to the sticking-place, and we’ll not fail – having the knowledge to stand by your convictions on market opinions is key. And then develop, evolve, and expand on this opinion by using research, analysis, facts, and cement.

8) The winter of our discontent – no thank you, we have already been through this – no need for a sequel.

9) When shall we three meet again? – the witches from Macbeth are always good for a quote, even without mentioning hubbling and bubbling, toil and troubling. There’s many clichés to describe this – a rising tide lifts all boats, in times of crises all markets correlate, etc, etc, – the point is, following commodities is about monitoring all assets – be it equities, bonds or currencies, as they all influence each other, and can provide insight into the short-term movement in another.

10) By the pricking of my thumb, something wicked this way comes – two words for you – hurricane season. This year is predicted to be one of the most active seasons for years based on some key factors. That said, some say a trained chimp can predict hurricanes better than NOAA.

If you wish to attend the UK event, please click on the ‘Much Ado..’ picture at the top of the post.

I bid thee farewell.

0 Apr 21 2010 @ 10:55am by Matt Smith in Natural Gas, risk management

US natural gas through the medium of the Hoff

So it hit me like a thunderbolt. It was after a recent bout of analysis that I came to the staggering realization that US natural gas has many similar attributes to the career of the man, the myth, the legend that is David Hasselhoff (‘the Hoff’). Through the years we have laughed, cried, and scratched our heads at the Hoff, a set of emotions not dissimilar from the ones evoked by the US natural gas market. So forthwith, I present my steadfast case.

First up to the stand, Knight Rider. After the blow-up by natural gas in the last year and a half, the face of the gas market has been drastically changed – much like Michael Knight’s. With new supply from forces such as LNG and shale coming to the fore, natty is left to battle against potential oversupply, while hoping industrial demand will continue to gather pace. Much like our quaffed hero, natural gas is not necessarily battling against other adversaries (although coal switching is a current consideration): changing dynamics make it it’s own worst enemy, like Michael’s nemesis Garthe Knight. And the kicker to all this – Michael is a man close to my heart, leaning on technical analysis (of a different kind) through his car and sidekick KITT (Knight Industries Two Thousand….I never realized…Wikipedia wins again…). 

Prior to the aforementioned blow up (-> -> $2.40), natural gas had been living to excess, partying like a rock star, and running up to $13.70. This parallels with another point in the Hoffmeister’s life. But as improving economic data attest, a return to form for natural gas may see it back under the spotlight and very much in demand again (regardless of T Boone and his natural gas wacky races). And like our dearly beloved commodity, the Hoff is also ready to rock on once again (in the night, presumably). 

The third and final serendipitous era of Mr H which ties to the good ship natural gas, is his period as lifeguard Mitch Buchannon. Life for natty, just as for Mitch, is never plain sailing, with storms (literally) seemingly always on the horizon. And just as hurricane season appears on our radars,  we have to recognize that this is a natural part of our commodity’s yearly life cycle, and is as much a mainstay as Mitch was to Baywatch. All we can do is manage our risk against these possible eventualities, as situations can turn fast. (and we can’t all move in slow motion…along a beach…with a flotation device…).

So where does this all leave natural gas? Basically, in a similar position to the Hoff. It has been down and out, but is gritting its teeth and is ready to show us what it is made of. Just like you can’t keep a good man down, natty is ready for a scrap. But it can be safe in the fact there will always demand for such a unique commodity. It’s been emotional.